Audio-Visual Copyright Society Ltd v Foxtel Management Pty Ltd (No 4)
[2006] ACopyT 2
•3 MAY 2006
COPYRIGHT TRIBUNAL OF AUSTRALIA
Audio-Visual Copyright Society Ltd v Foxtel Management Pty Ltd (No 4)
[2006] ACopyT 2COPYRIGHT – equitable remuneration – retransmission of free to air (‘FTA’) television programs through Pay TV’s set top unit – application by collecting society declared under s 135ZZT of Copyright Act 1968 (Cth) (‘the Act’) for purpose of Pt VC of that Act for a determination of the amount of ‘equitable remuneration’ payable by the retransmitters for their retransmission of the FTA programs simultaneously with the broadcasting of those programs by FTA broadcasters, pursuant to the statutory licence granted to the retransmitters by s 135ZZK of the Act – contingent valuation survey conducted by the collecting society to establish how much subscribers would be prepared to pay to retain retransmission – admissibility and weight of evidence of the survey – admissibility and weight of evidence of rates charged for retransmission in overseas countries – meaning of ‘equitable remuneration’ – approaches taken by Tribunal – notional bargain – parties to, and circumstances of, notional bargain.
EVIDENCE – survey evidence – contingent valuation survey.
Copyright Act 1968 (Cth), ss 135ZZK, 135ZZL, 135ZZM, 135ZZT, 153M
AUDIO-VISUAL COPYRIGHT SOCIETY LTD v
FOXTEL MANAGEMENT PTY LTD & ORSCT 3 of 2002
THE TRIBUNAL: LINDGREN J (PRESIDENT), PROFESSOR
DENNIS PEARCE (MEMBER), MS ANGELA BOWNE (MEMBER)
3 MAY 2006
SYDNEY
COMMONWEALTH OF AUSTRALIA
Copyright Act 1968
IN THE COPYRIGHT TRIBUNAL
CT 3 OF 2002
APPLICATION BY:
AUDIO-VISUAL COPYRIGHT SOCIETY LIMITED
FOXTEL MANAGEMENT PTY LIMITED
FIRST RESPONDENTOPTUS VISION MEDIA PTY LIMITED
SECOND RESPONDENTAUSTAR ENTERTAINMENT PTY LIMITED
THIRD RESPONDENT
THE TRIBUNAL:
LINDGREN J (PRESIDENT)
PROFESSOR DENNIS PEARCE (MEMBER)
MS ANGELA BOWNE SC (MEMBER)DATE OF ORDER:
3 MAY 2006
PLACE:
SYDNEY
THE TRIBUNAL DIRECTS THAT:
1.The proceeding be stood over to 14 June 2006 at 9.30 am before the President for mention, and, if necessary, for the making of directions for the service of submissions in relation to the outstanding issues.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
COMMONWEALTH OF AUSTRALIA
Copyright Act 1968
IN THE COPYRIGHT TRIBUNAL
CT 3 OF 2002
APPLICATION BY:
AUDIO-VISUAL COPYRIGHT SOCIETY LIMITED
FOXTEL MANAGEMENT PTY LIMITED
FIRST RESPONDENTOPTUS VISION MEDIA PTY LIMITED
SECOND RESPONDENTAUSTAR ENTERTAINMENT PTY LIMITED
THIRD RESPONDENT
THE TRIBUNAL:
LINDGREN J (PRESIDENT)
PROFESSOR DENNIS PEARCE (MEMBER)
MS ANGELA BOWNE SC (MEMBER)DATE:
3 MAY 2006
PLACE:
SYDNEY
REASONS FOR DETERMINATION (No. 4)
(Final Determination)TABLE OF CONTENTS
A. INTRODUCTION
A.1 THIS PROCEEDING
General
The principal provisions of Part VC of the ActA.2 LEGISLATIVE HISTORY AND BACKGROUND
[1]
[1]
[18]
B. THE PARTIES AND THEIR ACTIVITIES
B.1 SCREENRIGHTS
B.2 THE FTA CHANNELS
B.3 THE RETRANSMITTERS
Foxtel
Optus
Austar
TransACT
Number of subscribers
Bundling of servicesSubmissions relating to the characterisation of the retransmitters’ business
[38]
[38]
[52]
[54]
C. TECHNICAL MATTERS
C.1 TRANSMISSION OF FTA CHANNELS BY FTA BROADCASTERS
C.2 TRANSMISSION OF PAY TV CHANNELS BY
PAY TV PROVIDERSTransmission of Pay TV channels by analogue cable
1 Transmission of Pay TV channels by digital cable
2 Transmission of Pay TV channels by Optus CI satellite
3
C.3 RETRANSMISSION OF FTA CHANNELS BY
PAY TV PROVIDERSRetransmission on FTA channels on the analogue cable platform
Retransmission of FTA channels on the digital cable platform
Retransmission by satellite
Conditional access system
Reception equipment
Digital receivers and digital set top boxes
Remote controls
Reception quality[88]
[89]
[92]
[98]
D. RELEVANT PRINCIPLES
D.1 PREVIOUS TRIBUNAL APPROACHES
D.2 SOCIAL GAIN/NOTIONAL BARGAIN APPROACHES
‘Social gain’Are the FTA broadcasters parties to the hypothetical negotiation?
The ‘notional bargain’ – general considerations
Division of value of retransmission
Generation of additional profits to copyright owners
D.3 SUMMARY OF THE APPROACHES CONTENDED FOR
[130]
[130]
[147]
[176]
E.
THE SURVEY EVIDENCE
E.1 THE VARIOUS SURVEYS THAT HAVE BEEN CARRIED OUT
Introduction
The Screenrights survey – the pilot, Sweeney 1, Sweeney 2
The Survey questionnaire
Responses to the Survey
The Retransmitters’ Newspoll survey
Criticisms of the Screenrights surveyE.2 THE SURVEY WITNESSES
Dr Henstridge
Professor Carson
Professor Borland
Professor Hausman
Dr BockE.3 THE ALLEGED UNDERLYING FLAWS IN THE SURVEY
E.4 CONTINGENT VALUATION – THE MOST
APPROPRIATE APPROACH?E.5 CRITICISMS OF THE QUESTIONS IN THE
SCREENRIGHTS SURVEY4 Q7
5 Failure to refer to substitutes for retransmission
6 Demand curve for willingness to pay is upward sloping
7 Testing by Professor Hausman
8 Q9
9 Q10
10 Q11
11 Other criticisms
E.6 CONCLUSION
[179]
[179]
[211]
[225]
[229]
[239]
[279]
F. OVERSEAS RATES
F.1 THE UNITED STATES OF AMERICA
F.2 CANADA
F.3 EUROPE
F.4 OVERVIEW
12 The United States of America
13 Canada
14 Europe
15 Australia’s position internationally
16 Conclusion
[284]
[295]
[303]
[311]
[340]
G. APPROACHES OTHER THAN THE SURVEY APPROACH
G.1 EFFECT OF RETRANSMISSION
(1) Improved reception of FTA programs
17 (2) Convenience of a single remote control
G.2 COSTS OF RETRANSMISSION
G.3 BENEFITS OF RETRANSMISSION
Effect of retransmission of FTA programs on number of subscribers
18 Retransmission of FTA programs as a ‘subscription driver’
19 FTA as an aid to penetration of Pay TV into the marketplace
20 Churn
21 Submissions relating to the motivation of the Retransmitters
22 Publicity on commencement of retransmission
23 Publicity after commencement
24 Program guides
25 Reasons for continuing retransmission
26
G.4 COMPARABLE BARGAINS
[351]
[356]
[371]
[385]
[462]
H. SUBMISSIONS AS TO AMOUNT OF EQUITABLE REMUNERATION AND RELATED ISSUES
H.1 SUBMISSIONS AS TO AMOUNT
Screenrights’ submissions
Retransmitters’ submissionsH.2 REMUNERATION FOR LESS THAN FIVE CHANNELS
Screenrights’ submissions
Retransmitters’ submissions[476]
[476]
[487]
I. CONCLUSION [491]
A. INTRODUCTION
A.1 THIS PROCEEDING
General
The applicant, Audio-Visual Copyright Society Limited, trading as ‘Screenrights’ (‘Screenrights’), applies under s 135ZZM(1) of the Copyright Act 1968 (Cth) (‘the Act’ – unless otherwise stated, section references are references to sections of the Act) for a determination of the amount of equitable remuneration payable to it for the retransmission of free-to-air (‘FTA’) broadcasts under the ‘statutory licence’ created by Part VC of the Act. (We will also use ‘FTA’ as a noun to mean FTA television, channels, programs or stations, as the context will make clear.)
By notice published in the Gazette on 9 September 2001, the Attorney General, under s 135ZZT(1) of the Act, declared Screenrights to be the collecting society for all relevant copyright owners for the purposes of Part VC. A ‘relevant copyright owner’ is the owner of the copyright in a work, a sound recording or a cinematograph film (s 135ZZI), but not of the copyright in a television broadcast or sound broadcast (cf ss 87 and 91 of the Act).
Section 153M, within Pt VI of the Act, provides that the parties to an application of the present kind are the declared collecting society and the retransmitters. Foxtel Management Pty Limited (‘Foxtel’), Optus Vision Media Pty Limited (‘Optus’) and Austar Entertainment Pty Limited (‘Austar’) (collectively ‘the Retransmitters’) retransmit FTA broadcasts. On 31 October 2002 the Tribunal ordered that they be joined as respondents.
The Retransmitters gave to Screenrights remuneration notices pursuant to s 135ZZL of the Act, undertaking to pay equitable remuneration to Screenrights for the retransmission of FTA broadcasts by them as follows:
Foxtel Management Pty Limited (remuneration notice dated 4 March 2001) Broadcaster Region Channel 7, Channel 9, Channel 10, Australian Broadcasting Commission (ABC), Special Broadcasting Service (SBS)
Sydney, Brisbane, Melbourne, Adelaide, Perth, Gold Coast NRTV, NBN, PRIME Gold Coast Optus Vision Media Pty Limited (remuneration notice dated 10 May 2001) Broadcaster Region ABC, Channel 7, Channel 9, Channel 10, SBS Sydney ABC, Channel 7, Channel 9, Channel 10, SBS Melbourne ABC, Channel 7, Channel 9, Channel 10, SBS Brisbane Optus Vision Media Pty Limited (remuneration notice dated 7 September 2001) Broadcaster Region ABC, ABC Kids, Channel 7, Channel 9, Channel 10, SBS Sydney ABC, ABC Kids, Channel 7, Channel 9, Channel 10, SBS Melbourne ABC, ABC Kids, Channel 7, Channel 9, Channel 10, SBS Brisbane Optus Vision Media Pty Limited (remuneration notice dated 1 July 2003) SBS Digital News Sydney SBS Digital News Melbourne SBS Digital News Brisbane
Austar Entertainment Pty Limited (remuneration notice dated 25 October 2001)
Broadcaster
Territory Television Pty Ltd [Channel 9]
Info TV Pty Ltd
SBS
Regional Television Limited [Channel 7]
ABC [ABC and ABC Kids]
TransACT Capital Communications Pty Limited (‘TransACT’), Telstra Pay TV Ltd, Bright Telecommunications Pty Ltd and NC Cable Pty Ltd, each entities which also retransmit FTA broadcasts, also gave Screenrights remuneration notices. These entities are not parties to this proceeding, and the Tribunal’s determination of the amount of equitable remuneration will not be binding as between them and Screenrights or the relevant copyright owners. Neither Screenrights nor any of these entities have applied for a determination of the amount of equitable remuneration payable by them: see s 135ZZM(1) of the Act.
Screenrights’ application asserts that, over a period of some eight months from January to September 2002, it attempted to engage the Retransmitters in a process of discussion with the object of reaching agreement as to the amount to be paid as equitable remuneration, but without success.
The principal provisions of Part VC of the Act
The statutory licence is found in s 135ZZK(1) within Part VC of the Act. Subsections (1) and (2) of s 135ZZK are as follows:
‘(1)The copyright in a work, sound recording or cinematograph film included in a free-to-air broadcast is not infringed by the retransmission of the broadcast if:
(a) a remuneration notice given by, or on behalf of, the retransmitter to the relevant collecting society is in force; and
(b) the free‑to‑air broadcast was made by a broadcaster specified in the remuneration notice; and
(c) the retransmitter complies with section 135ZZN.
(2)The copyright in a work, sound recording or cinematograph film included in a free-to-air broadcast is not infringed by the making of a copy of the broadcast for the sole purpose of enabling a delayed retransmission of the broadcast to be made.’ (emphasis added)
The expression ‘retransmission’ is defined in s 10 as follows:
‘retransmission, in relation to a broadcast, means a retransmission of the broadcast, where:
(a)the content of the broadcast is unaltered (even if the technique used to achieve retransmission is different to the technique used to achieve the original transmission); and
(b) either:
(i)in any case—the retransmission is simultaneous with the original transmission; or
(ii)if the retransmission is in an area that has, wholly or partly, different local time to the area of the original transmission—the retransmission is delayed until no later than the equivalent local time.’
Section 10 defines ‘broadcast’ to mean ‘a communication to the public delivered by a broadcasting service within the meaning of the Broadcasting Services Act 1992’. The Broadcasting Services Act 1992 (Cth) (‘the BS Act’) defines ‘broadcasting service’ to mean, subject to certain exclusions not presently relevant:
‘a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radiofrequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means ...’
The expression ‘free-to-air broadcast’ is defined in s 135ZZI of the Act to mean a broadcast delivered by a national broadcasting service, a commercial broadcasting service, or a community broadcasting service, within the meaning of the BS Act.
‘Transmission’ is not defined in s 135ZZI, but ‘delayed retransmission’, in relation to a FTA broadcast, is there defined to mean a retransmission of the broadcast in an area that has, wholly or partly, a different local time to the area of the original transmission, where the delay is until no later than the equivalent local time. The effect of sub ss 135ZZK(2), (3) and (4) is, in general terms, that if, by reason of s 135ZZK(1), a retransmission of a broadcast would not infringe the copyright in it, the making of a copy of the broadcast for the sole purpose of enabling it to be retransmitted later in an area that has a different local time will not do so either, provided the delay is no greater than the difference between the two local times, and further provided the copy is destroyed within seven days after it is made. Apart from this exception, the statutory licence operates only if retransmission occurs simultaneously with the original FTA transmission.
Section 135ZZL provides for the giving of remuneration notices by retransmitters to the declared collecting society, by which the retransmitter undertakes to pay equitable remuneration to the society for retransmission of FTA broadcasts by specified broadcasters.
A collecting society is declared under s 135ZZT ‘for all relevant copyright owners or for such classes of relevant copyright owners as are specified in the notice.’ As noted at [2], the expression ‘relevant copyright owner’ is defined in s 135ZZI to mean the owner of the copyright in a work, a sound recording or a cinematograph film. This definition is consistent with s 135ZZK(1), which provides that the copyright in ‘a work, sound recording or cinematograph film’ is not infringed where the conditions of the statutory licence are met.
A remuneration notice must specify that the amount is to be assessed on the basis of records to be kept by the retransmitter under s 135ZZN: s 135ZZL(2). Section 135ZZN requires a retransmitter which gives a remuneration notice to establish and maintain a system for recording the title of each program included in each retransmission. The record system to be established must be determined by agreement between the retransmitter and the declared collecting society, or, failing agreement, by the Tribunal on application to it made by either of them. We were informed that the parties have agreed upon a record keeping system.
It will be noted that, by reason of s 135ZZK(1)(c) (set out at [6]), compliance with s 135ZZN is one of the conditions of ‘non-infringement’. Accordingly, a retransmitter which has given a remuneration notice, provided it complies with s 135ZZN (see [12]), will not infringe copyright, even though the amount of equitable remuneration payable by it is not yet agreed or determined.
Screenrights did not propound in its negotiations with the Retransmitters a particular amount but sought their agreement to a ‘contingent valuation survey’ to be conducted by the parties jointly. However, the Retransmitters did not agree to participate, and Screenrights conducted its own contingent valuation survey. A major issue in the case has related to the validity of that survey, and voluminous expert evidence was adduced relating to it. That evidence is addressed principally in Part E below.
The Tribunal is required by s 153M(2) to consider the application, and, after giving the parties an opportunity to present their cases, to make an order determining the amount which it considers to be equitable remuneration for the making of the retransmissions of FTA broadcasts. Subsection 153M(3) provides that, in making an order, the Tribunal may have regard to such matters (if any) as are prescribed. None have been prescribed. Subsection 153M(4) provides that the Tribunal’s order may be expressed to have effect in relation to retransmissions made in reliance on s 135ZZK before the day on which the order is made. This provision therefore permits retrospectivity back to the dates of the giving of the respective remuneration notices by the Retransmitters.
Without the statutory licence, retransmission would involve an infringement of copyright by reason of its being a communication to the public of the works (s 31(1)(a)(iv)), of the sound recordings (s 85(1)(c)), and of the cinematograph films (s 86(c)) involved.
Section 87(c) provides that copyright in relation to a television broadcast or sound broadcast includes the exclusive right ‘to re-broadcast it or communicate it to the public otherwise than by broadcasting it.’ As will appear below, the Retransmitters communicate FTA television broadcasts to the public otherwise than by broadcasting them, when they retransmit them to their subscribers. They do not, however, infringe the broadcast copyright because of s 212(2) of the BS Act.
A.2 LEGISLATIVE HISTORY AND BACKGROUND
Screenrights submits, and we accept, that a ‘main pillar of international copyright law is minimum standards’, and that without them, ‘signatories to treaty obligations could fashion widely divergent national copyright standards, often to cater for parochial interests’. Since the Berne Convention for the Protection of Literary and Artistic Works of 1886 (‘Berne’), copyright treaty obligations have existed in the form of minimum standards to which member states are required to give effect in their national laws.
At the 1948 Brussels Revision Conference, Berne was amended to provide for a retransmission right as a minimum copyright standard. Paragraph (ii) was inserted into Art 11bis(1):
‘(1)Authors of literary and artistic works shall have the exclusive right of authorizing:
…
(ii)any communication to the public, whether over wires or not, of the radio-diffusions of the work, when this communication is made by a body other than the original one.’
…
Screenrights submits that this right is correctly regarded as separate from the broadcasting right itself (expressed in Berne Art 11bis(1)(i)), and, in particular, that an exercise of the right is called for, irrespective of whether the retransmitter reaches a ‘new public’: all that matters is that the retransmitter is a party other than the holder of the broadcasting right itself. Accordingly, the retransmission right should be recognised irrespective of whether the recipients of a retransmission fall inside or outside the intended area of the primary broadcast. Part VC of the Act is consistent with this view: it provides for a remunerated exception to the copyright owner’s rights without discrimination as between local area retransmission on the one hand, and retransmission which reaches a ‘new public’ on the other.
At the 1928 Rome Revision Conference, when the minimum standard for the broadcasting right itself was inserted into Berne as Art 11bis(1), the need for intervention on the part of public authorities in cultural and social interests was reconciled with the economic interests of authors by the making of the broadcasting right subject to Art 11bis(2):
‘The national legislations of the countries of the Union may regulate the conditions under which the right mentioned in the preceding paragraph shall be exercised, but the effect of those conditions will be strictly limited to the countries which have put them in force. Such conditions shall not in any case prejudice the moral right (droit moral) of the author, nor the right which belongs to the author to obtain an equitable remuneration which shall be fixed, failing agreement, by the competent authority.’ (emphasis added)
The retransmission right, added as para (ii) to Art 11bis(1) in 1948, was also made subject to Art 11bis(2), which was amended consequently. As amended in 1948, Art 11bis(2) took its present form, which is:
‘It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral right of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority.’
Taken together, Arts 11bis(1)(ii) and 11bis(2) may be seen as constituting the ‘Berne retransmission régime’.
The agreement on Trade-Related Aspects of Intellectual Property Rights dated 15 April 1994 (‘TRIPS’) which comprises Annex 1C of the Marrakesh Agreement establishing the World Trade Organisation (WTO) requires by Art 9(1) that contracting parties comply with Arts 1 to 21 of Berne, excluding only moral rights. Subject to that exclusion, the Berne retransmission régime is imported into TRIPS by reference, and may be seen to be the ‘Berne‑in‑TRIPS retransmission régime.’ Screenrights submits that a failure of Australian law to afford equitable remuneration for retransmission would give rise to a violation of this regime.
In 1988, ss 89DA to 89DE of the Broadcasting Act 1942 (‘the Broadcasting Act’) introduced a régime of ‘retransmission permits’: permits which authorised a person to retransmit FTA broadcasts. Section 122 of the Broadcasting Act provided that, unless the person was also a licensee or multichannel service permit holder, ‘no action, suit or proceeding [lay] against a person who [was] a holder of a retransmission permit in respect of any matter transmitted by the person in accordance with the condition of the permit.’
At the same time, the Broadcasting (Retransmission Permits and Temporary Transmission Permits) Fees Act 1988 (Cth) was passed. Sections 4 and 5 of that Act provided for a tax by way of a fee payable upon the grant and renewal of a retransmission permit. The tax was to be determined by regulations, but regulations were not made.
The BS Act did not continue the permit/taxation approach to retransmission. Rather, s 212 of the BS Act provided:
‘(1)Subject to subsection (2), the regulatory regime established by this Act does not apply to a service that does no more than:
(a)re-transmit programs that are transmitted by a national broadcasting service; or
(b)re-transmit programs that are transmitted by a commercial broadcasting licensee or a community broadcasting licensee:
(i) within the licence area of that licence; or
(ii) outside the licence area of that licence in accordance with permission in writing given by the ABA [Australian Broadcasting Authority].
(2)No action, suit or proceeding lies against a person in respect of the re‑transmission by the person of programs as mentioned in sub‑section (1) unless, at the time of the re‑transmission, the person is also a licensee.’
At that time, s 199(4) of the Act provided that a person who, by the reception of an authorised television broadcast or sound broadcast, caused a literary, dramatic or musical work or an adaptation of such a work, or a cinematograph film, to be transmitted to subscribers to a diffusion service, was to be treated in any proceeding for infringement of copyright as if the person had so acted with the licence of the copyright owner. Subsection 26(1) of the Act defined the notion of transmission to subscribers to a diffusion service as transmission ‘over wires, or over other paths provided by a material substance, to the premises of subscribers to the service’. The word ‘broadcast’ was defined by s 10(1) of the Act to mean ‘transmit by wireless telegraphy to the public’. Transmission to subscribers to a diffusion service therefore stood in contrast to broadcasting.
Pay (or subscription) television (‘Pay TV’), at that time only in the form of cable TV, was introduced in Australia in 1995, but not without opposition from the broadcasters of FTA programs. In Amalgamated Television Services Pty Limited v Foxtel Digital Cable Television Pty Ltd (1995) 60 FCR 483 (‘Amalgamated Television’), the owners of FTA broadcasting television stations in Sydney and Melbourne sought an injunction restraining Foxtel Digital Cable Television Pty Ltd and Foxtel Management Pty Ltd from retransmitting programs of Channels 7, 9 and 10. Foxtel’s Pay TV service was planned to commence on Monday 23 October 1995. Davies J heard the application for the injunction on 11 and 13 October 1995, and delivered judgment on 20 October 1995 (see [30]), three days before the planned commencement of retransmission by Foxtel (Optus had already commenced its Pay TV channels on 20 September 1995, but without the retransmission of FTA – see [61]). On the day on which his Honour delivered judgment, Optus began retransmitting the FTA programs to its subscribers, while, as planned, three days later, on 23 October 1995, Foxtel launched its own Pay TV service, including the retransmission of channels 7, 9 and 10.
The full text of s 199(4) of the Act, which Davies J had to consider, was as follows:
‘A person who, by the reception of an authorized television broadcast or sound broadcast, causes a literary, dramatic or musical work or an adaptation of such a work, an artistic work or a cinematograph film to be transmitted to subscribers to a diffusion service shall be treated, in any proceedings for infringement of the copyright, if any, in the work or film, as if the person had been the holder of a licence granted by the owner of that copyright to cause the work, adaptation or film to be transmitted by the person to subscribers to that service by the reception of the broadcast.’ (emphasis added)
The definition in s 26(1) of the Act of the expression ‘transmission to subscribers to a diffusion service’ was noted at [26]. Clearly, the statutory licence created in favour of retransmitters by s 199(4) had no capacity to apply to retransmission by satellite, then a thing of the future. The exclusive right to retransmit by satellite did not, however, form part of any form of copyright under the Act at that time. Although the copyright in a work or cinematograph film included the exclusive right to cause it to be transmitted to subscribers to a diffusion service (more precisely, in the case of an artistic work, ‘to cause a television program that include[d] the work’ to be so transmitted) (ss 31(1)(a)(v), (b)(iv), 86(d)), and therefore a licence in those cases was called for, copyright in sound recordings (s 85) and in television broadcasts and sound broadcasts (s 87) did not include that exclusive right. Accordingly, retransmission of a sound recording, television broadcast or sound broadcast to subscribers to a diffusion service was not an infringement of the copyright in those subject matters.
In Amalgamated Television, Davies J held that s 199(4) (set out at [28]) applied to the holders of the new licences to transmit to subscribers to a diffusion service. An appeal against his Honour’s decision was dismissed: Amalgamated Television Services Pty Ltd v Foxtel Digital Cable Television Pty Ltd (1996) 66 FCR 75. Moreover, since copyright in relation to sound recordings, television broadcasts and sound broadcasts did not include the exclusive right to cause them to be transmitted to subscribers to a diffusion service, the copyright in them presented no problem for the retransmission of FTA broadcasts.
Section 87 of the Act provided that the copyright in relation to a broadcast included the exclusive right ‘to re-broadcast’ the broadcast. As already noted, ‘broadcast’ was defined in s 10(1) of the Act to mean ‘transmit by wireless telegraphy to the public’. ‘Wireless telegraphy’ was defined in the same subsection to mean ‘the emitting or receiving, otherwise than over a path that is provided by a material substance, of electronic energy.’
In Amalgamated Television, Davies J held that s 212(1) (set out at [25]) provided a defence to retransmitters in so far as the regulatory régime established by the BS Act was concerned. Accordingly, retransmission of FTA did not infringe the copyright in the works referred to in the section.
Subsequently, there were various proposals for legislative change. Ultimately, as from its commencement on 4 March 2001, the Copyright Amendment (Digital Agenda) Act 2000 (Cth) (‘the Digital Agenda Act’) repealed s 199(4), replaced it with the régime laid down in Part VC of the Act, and amended s 212 of the BS Act to read as follows:
‘(1)Subject to this section, the regulatory regime established by this Act does not apply to a service that does no more than:
(a)re-transmit programs that are transmitted by a national broadcasting service; or
(b)re-transmit programs that are transmitted by a commercial broadcasting licensee or a community broadcasting licensee:
(i)within the licence area of that licence; or
(ii)outside the licence area of that licence in accordance with permission in writing given by the ABA.
(2)No action, suit or proceeding lies against a person in respect of the re‑transmission by the person of programs as mentioned in subsection (1).
(2A)However, the rule in subsection (2) does not prevent an action, suit or proceeding against a person under the Copyright Act 1968 for infringement of copyright subsisting in a work, a sound recording or a cinematograph film, where:
(a)the infringement is in respect of the re-transmission by the person of programs as mentioned in subsection (1); and
(b)the re-transmission is not provided by a self-help provider.
(3)A reference in this section to a re-transmission does not include a reference to:
(a)a re-transmission by a commercial broadcasting licensee of the programs transmitted by the licensee’s commercial broadcasting service; or
(b)a re-transmission by a community broadcasting licensee of the programs transmitted by the licensee’s community broadcasting service; or
(c)a re-transmission by the Australian Broadcasting Corporation of the programs transmitted by any of its national broadcasting services, being national broadcasting services covered by paragraph 13(1)(a); or
(d)a re-transmission by the Special Broadcasting Service Corporation of the programs transmitted by any of its national broadcasting services.
(4)In this section:
cinematograph film has the same meaning as in the Copyright Act 1968.
self-help provider has the meaning given by section 212A.
sound recording has the same meaning as in the Copyright Act 1968.
work has the same meaning as in the Copyright Act 1968.’
The expression ‘self help provider’ can be generally described as referring to small arrangements for the improvement of reception.
Subsections (2) and (2A) of s 212 create a full and free exception in favour of the retransmission of programs from the broadcast signal copyright owned by broadcasters.
In the result, s 212(1) of the BS Act now overcame any problem which the BS Act itself might have posed for retransmitters, and ss 212(2) and (2A) of that Act overcame any copyright problem for them in relation to other species of copyright, notably the copyright in television broadcasts and sound broadcasts, but it did not overcome, generally speaking, the problem posed for them by copyright subsisting in a work, a sound recording or a cinematograph film. That problem for retransmission was left to be addressed in the new Pt VC of the Act described earlier.
The Digital Agenda Act did not preserve the previous distinction between ‘diffusion’, that is to say, transmission over wires or other material path, on the one hand, and broadcasting, that is to say, transmission not over wires or other material path, on the other hand. It replaced these concepts with that of ‘communication’. An exclusive right to communicate to the public now forms part of the definition of copyright in works (s 31(1)(a)(iv), (b)(iii)), sound recordings (s 85(1)(c)), cinematograph films (s 86(c)), and television broadcasts and sound broadcasts (s 87(c)). Subsection 10(1) of the Act defines ‘communicate’ to mean:
‘make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject‑matter, including a performance or live performance within the meaning of this Act.’
In summary, to retransmit an FTA broadcast is a form of communication to the public. Communicating to the public poses no problem for the Retransmitters in relation to the copyright in television broadcasts and sound broadcasts by reason of s 212 of the BS Act, and the problem which it would otherwise pose for them in relation to the copyright in works, sound recordings and cinematograph films is overcome by Pt VC of the Act, subject to the liability to pay equitable remuneration previously discussed.
B. THE PARTIES AND THEIR ACTIVITIES
B.1 SCREENRIGHTS
Screenrights was incorporated as a company limited by guarantee on 8 January 1990. It was formed for the purpose of being a declared collecting society under Pts VA and VB of the Act, which were introduced by the Copyright Amendment Act 1989 (Cth), with effect from 1990. Screenrights has so operated since its incorporation. On 4 May 2000 it was declared as a collecting society under s 153F for some classes of government copying (see Pt VII Div 2 of the Act). As noted at [2], since 9 September 2001, Screenrights has been the declared collecting society, for the purposes of Pt VC of the Act, for all owners of copyright in the works, sound recordings and cinematograph films in FTA broadcasts that are retransmitted.
In its Pt VC role, Screenrights operates on a not-for-profit basis for the benefit of the holders of copyright in audio and audio-visual works, including producers, distributors, script writers, music publishers and composers, and visual artists. Members of Screenrights are the owners of copyright in audio-visual material (film, television and video programs) and in the works used in such material, and their exclusive licensees and agents.
According to Simon Thomas Lake, the Chief Executive Officer of Screenrights, ‘Screenrights does not engage in licensing in respect of individual works in traditional markets; rather, it administers rights through a number of collective licensing services’. Apart from the appointment by its members of Screenrights as their agent to collect revenues in respect of retransmission or private copying in other countries, and a very small amount of voluntary licensing as non-exclusive agent for its members, Screenrights’ role has been confined to that of a ‘declared collecting society’: see [38].
Screenrights is on the Board of the Association of International Collective Management of Audio-visual Works (‘AGICOA’). AGICOA was established in 1981. It is an international non-governmental organisation, which operates as a retransmission collecting society and represents other retransmission collecting societies: see [312]. Screenrights is not, however, involved in the day-to-day management of AGICOA. Screenrights is also an associate member of the European Federation of Joint Management Societies of Producers for Private Audio-visual Copying (‘EUROCOPYA’), which represents private copying societies in Europe.
As at 30 June 2003, Screenrights had 1 788 members from more than 48 countries worldwide, and over 30 000 titles in its rightsholders’ database. Screenrights’ members include both corporate and individual members. Some artists choose to be members directly while others are members of other collecting societies, such as the Australasian Performing Right Association Ltd (‘APRA’) or Viscopy, which are themselves members of Screenrights. AGICOA is a member of Screenrights. An example was given in evidence of a film, the producer of which is treated as the ‘rightsholder’ for present purposes. The film title stands for numerous separate works, each of which may be linked to many countries, depending on the initial instructions given by the rightsholder. Rights owners can also appoint Screenrights as their non-exclusive agent to register their titles with other collecting societies.
Screenrights determines the total amount for distribution to its members after calculating collections (including interest) for the financial year and deducting expenses.
Up to 9 September 2001, when Screenrights was declared the collecting society for the purposes of Pt VC, it was not entitled to collect or distribute money under Pt VC. Prior to that time, Mr Lake negotiated with Deborah Shayne Richards, the Executive Director of the Australian Subscription Television and Radio Association (‘ASTRA’), the industry body representing subscription television operators, including the Retransmitters, in relation to questions of record keeping.
On 19 September 2001, the Attorney-General formally notified Screenrights of the declaration, and on the following day Mr Lake informed ASTRA and each of the Retransmitters, as well as TransACT, of the declaration. From that time, the negotiations between Screenrights and ASTRA related to the amount of equitable remuneration payable and the carrying out of the contingent valuation survey proposed by Screenrights. Those negotiations occupied the parties up to 30 August 2002.
The Retransmitters submit that ‘Screenrights approaches the task of valuation of the rights it administers under Pt VC in a distinctly uncommercial manner’. They suggest that this may be attributable to the fact that Screenrights, unlike other collecting societies, such as APRA, has had only very little experience in the negotiation and administration of voluntary licensing arrangements. We do not understand the Retransmitters to suggest that Screenrights’ alleged lack of commercial experience in negotiating voluntary licensing arrangements should, in itself, somehow influence the amount of equitable remuneration to be determined. It should not and does not in our reasoning below.
The Retransmitters point to Mr Lake’s estimate of the likely cost of administering the scheme for the distribution of the payments to be received for retransmission. Mr Lake stated that, taking into account the cost of developing the ‘necessary broadcast register’ (which he says AGICOA has estimated at approximately $560 000) and ‘other costs associated with the allocation process’, Screenrights’ cost of the administration of retransmission payments is likely to be in the order of $1.1 to $1.2 million in the first year. He then stated: ‘We envisage that this figure will be representative of subsequent years, subject to CPI and other external price increases’. We do not find this generalised evidence very persuasive. Evidence on the matter was not adduced from any officer of AGICOA. Mr Lake gave only the global figures mentioned. The cost of developing the broadcast register will not recur annually. On the basis of $1.1 to $1.2 million, a deduction of $560 000 for the development of software would apparently leave $540 000 to $640 000 as the recurrent cost. Evidence was not led as to how this figure was arrived at.
Cross-examination of Mr Lake suggested that the figures were subject to the possibility of substantial adjustment. Mr Lake said that Screenrights was trying to work out the best way to ‘work in with AGICOA who have obviously a huge works register and a huge rights information register to work in with’. He said that Screenrights was in negotiation with AGICOA and that any system Screenrights might design must be ‘AGICOA compliant’. He added that whatever system Screenrights ultimately adopted would be influenced by the outcome of this proceeding, and that Screenrights had received various quotes for the costs of getting ‘the enhanced data to be able to be AGICOA compliant’. These quotes were not in evidence. Later, Mr Lake said that Screenrights had ‘sought the quotes from three different suppliers as to the data that would be necessary to use the AGICOA system’. He said that Screenrights’ requirements to enable distributions to be made were ‘largely driven by the AGICOA requirements since AGICOA have that massive works register’ (see [313]).
Mr Lake said that in order to ‘trigger’ the AGICOA system, information must be 100 percent compliant with AGICOA’s requirements, and that he thought that AGICOA requires about 16 or 17 pieces of information. Later, however, Mr Lake said that whatever distribution scheme might come into existence would be ‘in part driven by the revenue so to speak; so that we would hope to be as compliant as we could with AGICOA’. Mr Lake explained that Screenrights will be paying AGICOA both a fee for carrying out research for Screenrights and money representing AGICOA’s entitlement, as a member of Screenrights, as rights holder or representative of rights holders.
In summary, the evidence concerning the cost of collection and distribution remains unclear. Apparently there is a range of costs and degrees of ‘AGICOA compliance’. Perhaps the global figures mentioned earlier are for a ‘Rolls Royce’ system. Without more and detailed evidence, the Tribunal cannot be satisfied that any particular amount represents the minimum necessary to enable Screenrights to collect and distribute effectively.
The Tribunal appreciates that the present issue is a complex one. No doubt, a saving in AGICOA computer-related costs may signify an increase in costs of other kinds. The Tribunal will take into account as best it can Mr Lake’s evidence in relation to the cost of collection and distribution.
B.2 THE FTA CHANNELS
The FTA channels are ABC, SBS and Channels 7, 9 and 10. The first two are national broadcasting services and the last three, commercial broadcasting licensees. In addition, there are two ‘digital multichannels’, ABC 2 and SBS News. ABC 2 is broadcast by the ABC, and SBS News is broadcast by SBS.
Operators of multichannels can broadcast two or more channels of television programs at the same time (because digital signals carry more data than analogue signals). The ABC and SBS (but not the commercial broadcasters) are permitted to do this by clause 5A of Schedule 4 of the BS Act (which was added to the BS Act by the Broadcasting Services Amendment (Digital Television and Datacasting) Act 2000). The ABC and SBS are thereby able to broadcast a large variety of programs, including regional news and current affairs, and educational, science, religious, health, arts, cultural, children's and foreign language programs. The evidence was that subscribers cannot receive the multichannels via their terrestrial aerials without purchasing their own FTA digital set top box.
B.3 THE RETRANSMITTERS
The following description of the operations of the Retransmitters states the Tribunal’s understanding of the position as at the time of the hearing. Changes occur with some frequency in the Pay TV industry. However, the Tribunal has not been made aware of any post-hearing developments of substance that would affect the outcome of this proceeding.
Foxtel
Foxtel commenced transmission on 23 October 1995, just three days after Davies J’s decision in Amalgamated Television (discussed at [27]-[30]). At that time, Foxtel provided a ‘analogue cable’ service, consisting of 20 channels. This included the retransmission of the five FTA channels. Foxtel used the hybrid fibre coaxial cable (‘HFC’) network rolled out by Telstra Media Pty Limited, a part owner of Foxtel.
In March 1999, Foxtel commenced transmitting its service via satellite using digital technology, although referring to it as its ‘analogue satellite’ service because the service was identical in content to that received by analogue cable subscribers, except in one important respect. Foxtel’s analogue satellite service has never included the retransmission of any FTA channel: it has been used only for the transmission of Pay TV channels. The use of satellite meant that Foxtel’s service was available to subscribers who lived in areas where cable had not been laid. Foxtel used Optus Networks Ltd’s B3 satellite for this service until December 2003, when it switched to using Optus’s more advanced C1 satellite.
As at January 2004, there were 46 channels, including the five FTAs, available on Foxtel’s analogue cable and analogue satellite services. Whether a particular subscriber has access to a particular channel depends upon the ‘package’ subscribed to. All subscribers must purchase the ‘basic package’, or ‘basic tier’, of 26 channels. For analogue cable subscribers, this package includes the retransmission of all five FTA channels. Subscribers may choose to pay additional fees for the transmission of channels not included in the basic package. Some of these channels are available through the purchase of additional ‘tiers’ (suites of channels grouped together), such as ‘Movie Essentials’, ‘Movie Channels’ and ‘Entertainment Plus’. Five other channels are available to be purchased individually by basic package subscribers. Subscribers can also purchase ‘pay-per-view’ events, such as sporting events or concerts.
On 14 March 2004, following a digital upgrade of Telstra’s HFC cable, Foxtel launched its ‘digital cable’ service. Digital transmission enabled Foxtel to provide better sound and picture quality, more channels, and enhanced ‘functionality’. From its beginning, the digital cable service has included the retransmission of all the FTA channels.
Foxtel also provides a digital satellite service. This is the same as Foxtel’s digital cable service, except that the retransmission of FTA channels is more limited. Foxtel has retransmitted SBS and Channel 9 to its digital satellite subscribers since March 2004, and the ABC since February 2005, but not Channel 7 or Channel 10.
In total, the digital service comprises 109 channels, including 30 audio channels, 10 ‘time-shift’ channels (where certain popular Pay TV channels are re-broadcast two hours later), and 31 channels that provide ‘near video on demand’ services. The digital service also allows for ‘interactivity’: viewers are able to access different camera angles (for example, on the ‘Sports Active’ channel), participate in surveys, and vote. As in the case of Foxtel’s analogue service, subscribers must take a basic package, and may subscribe to additional tiers of channels or to specific channels individually, or purchase movies through the near video on demand services.
Optus
Optus commenced transmitting on 20 September 1995 without retransmitting FTA channels. However, on 20 October 1995, the day on which Davies J delivered judgment in Amalgamated Television, Optus included the retransmission of the five FTA channels in its basic tier.
Optus’s subscription television service has always been provided by HFC cable, which is owned by entities related to Optus. Optus is essentially a cable only service. It has always transmitted in analogue format, not digital format, although it has under review the delivery of a digital subscription television service.
As a result of a content sharing agreement between Optus and Foxtel, which was approved by the Australian Competition and Consumer Commission in November 2002, subscribers to Optus’s Pay TV service have, since then, been able to receive the same channels as subscribers to Foxtel’s digital service receive. All Optus subscribers must purchase a basic package of 36 channels, which includes six FTA channels (Channels 7, 9, 10, ABC and SBS, as well as ABC’s digital multichannel). Subscribers may choose to purchase additional channels.
Since 1999, Optus has offered its subscription television service in a ‘bundle’ with other Optus services, such as internet and telephone services. See further [76]-[79] on the ‘bundling’ of services.
Austar
Austar’s subscription television service is available to customers in rural and regional Australia. It covers the rural and regional areas of New South Wales, the Northern Territory, Queensland, South Australia, Victoria and Tasmania. It also services Darwin and Hobart. Austar’s service is not available in the metropolitan areas of Brisbane, Sydney or Melbourne, or in any part of Western Australia.
Austar began transmitting to subscribers in August 1995. Its service was originally provided to people who had been subscribers to the Galaxy service, Galaxy having gone into external administration.
Originally, Austar’s service was transmitted using ‘cable wireless technology’, which is also known as microwave delivery service or ‘MDS’. Because of the limited capacity of this technology, the Austar service comprised only 14 or 19 channels, depending on the location of the subscriber. In 1997, Austar began using Optus’s B3 satellite to deliver its service to subscribers. Existing Austar subscribers who were within the B3 satellite’s footprint were ‘migrated’ to the new delivery technology. With the exception of its cable customers in Darwin, all of Austar’s subscribers were transferred to satellite delivery after the launch of Optus’s C1 satellite (in June 2003), which has a larger footprint. At present, Austar delivers its service by satellite only. Austar’s satellite subscription television service has always been in digital format.
Austar provides two digital services. The ‘Old Austar Digital service’ was offered to persons subscribing in the period between early 2000 and March 2004. It offers more than 40 channels and includes interactive features made possible by digital technology. The ‘New Austar Digital service’, which has operated since March 2004, includes 22 additional channels and more packaging options. All new subscribers are required to take the New Austar Digital service, but the Old Austar Digital service is still provided to those who commenced subscribing before March 2004 and have not ‘migrated’ to the New Austar Digital service.
Subscribers to both the Old Austar Digital service and the New Austar Digital service must purchase a basic package of channels, and can choose to add on tiers of channels, purchase specific channels individually, and purchase particular pay-per-view events.
On 1 November 2001, Austar commenced retransmission of the ABC, and on 1 December 2002, SBS. It does not retransmit the other FTAs.
TransACT
Although TransACT is not a respondent to this proceeding, one of its employees, Dianne Kerri O’Hara, Company Secretary of all companies within the TransACT Group, gave evidence about its operations. TransACT took no other part in the proceeding.
TransACT was described as a ‘full-service communications network provider in the Australian Capital Territory’. TransACT’s ‘TransTV’ provision of subscription television, which commenced in 2001, included foreign language channels, special interest channels, video on demand, and retransmission of FTA. In late 2001, TransACT and Foxtel entered into an agreement for the Foxtel analogue service to be provided over the TransACT network. This service is called the ‘Foxtel on TransACT service’.
Since mid-2003, Trans ACT’s Pay TV service has not been available to consumers as a ‘stand-alone’ product: subscribers could purchase the TransTV service only if they also purchased other TransACT products, such as internet and telephone services.
In May 2004, TransACT introduced a ‘refreshed’ digital service – ‘TransTV Digital’. Since then, channels which are available to customers on the Foxtel on TransACT service, have been available to TransTV Digital customers. The TransTV Digital service includes retransmission of all the FTA channels within the licence area.
Number of subscribers
The number of the subscribers to each Retransmitter was provided to the Tribunal but was said to be confidential, and a ‘confidentiality order’ was made. However, it is possible for the Tribunal to say that the total number of subscribers to Pay TV at the end of 2004 exceeded 1 660 000. The number is increasing steadily. It will be clear from what has already been said, however, that this is far from signifying that 1 660 000 subscribers receive retransmission of all five FTAs.
Bundling of services
In some cases the Retransmitters’ Pay TV channels are ‘bundled’ with other communication services that they offer, either themselves or in conjunction with other companies. A person may subscribe to the whole of the bundle on terms that are usually more favourable than if the components were taken individually.
In the case of Foxtel, Telstra (which is a 50% shareholder of Foxtel) provides the cable for the retransmission of FTA programs at no cost to Foxtel. Telstra markets a bundle of services to its customers, which includes Foxtel Pay TV, telephony and broadband (BigPond).
Since 1999, Optus has offered bundled services of telephony, internet and Pay TV over the HFC cable network. This is referred to as ‘triple play’, that is, providing voice, data, and video over the one cable.
Austar and TransACT also bundle their Pay TV with other services such as mobile telephony and internet. As noted above, since mid-2003, TransACT subscribers are required to subscribe to the bundle, and cannot take only the Pay TV component.
Submissions relating to the characterisation of the Retransmitters’ business
The Retransmitters seek to emphasise that theirs ‘is a business of distributing subscription television ... not a business of retransmitting FTAs’. In contrast, in describing the Retransmitters’ business, Screenrights submits (footnotes omitted):
‘The Respondents, Foxtel, Optus and Austar, together with TransACT, supply pay television (or subscription television) services by cable and satellite, as well as offering other services such as telephony and mobile and data (internet) services to their respective subscribers. As part of their pay television services they each offer retransmissions of free-to-air television broadcasts, which are bundled with other pay television channels in order to maximise the number of subscribers to those particular “packages”.’
In reply, the Retransmitters point out that Foxtel does not offer telephony, mobile and data services to its subscribers, and that while Austar does resell mobile services, ‘it is not its core business, and it has little to do with its television business.’. The Retransmitters reject the suggestion that Foxtel’s business is an ‘integrated business’ that would or does offer cheaper subscription television if a customer also purchases Telstra telephone services. If that were correct, they submit, Telstra, a company separate from, although a 50 percent owner of, Foxtel, would make a profit from the transaction and Foxtel would not. The correct position, according to the submission, is that Telstra, not Foxtel, offers Foxtel’s services in a ‘package’ deal with its telephone and internet services.
The Retransmitters submit that further evidence in support of their contention that retransmission is not a ‘serious’, let alone ‘core’, part of their businesses can be found in the evidence of three witnesses:
· Patrick Raymond Delany, Foxtel’s Executive Director Content, Produce Development and Delivery;
· Deanne Evelyn Weir, General Counsel and Company Secretary of Austar; and
· Christopher James Price Keely, General Manager, Business Affairs, of Optus.
These witnesses testified that the Retransmitters’ ‘primary business’ is to provide a product which is different from, and an alternative to, FTA television. The Retransmitters submit that this was demonstrated to the Tribunal on its visit to Foxtel’s premises, where ‘minimal equipment’ was shown to be used for retransmission in contrast to the ‘enormous resources, energy and creativity devoted to the production of subscription channels’. It was, indeed, clear to the Tribunal from that visit that almost all of Foxtel’s resources were devoted to the production and transmission of Pay TV channels, and that almost no additional technology or resources were required for the retransmission of the FTA channels: it appeared that only a relatively small piece of unattended equipment was involved.
In response, Screenrights submits that, regardless of how the Retransmitters describe themselves, they do distribute FTA channels by retransmission, and do so ‘in a bundled fashion with their subscription services.’ Screenrights submits that how the Retransmitters choose to label themselves for the purposes of this proceeding is beside the point.
Where services are bundled, Screenrights describes the Pay TV component of the bundle as a ‘portal’ to the bundle. It suggests that the availability of Pay TV is seen by each Retransmitter as the means of attracting persons to subscribe to the other services offered.
A subscriber to Pay TV will undoubtedly be informed of other services that the Retransmitter or a commercial associate makes available. Access to these other services may be on terms that are more favourable to Pay TV subscribers. However, subject to the exception referred to below, Pay TV does not provide the entry point to the bundle of services, and, it is not a condition of subscription to other services offered by or through Foxtel and Austar that a person subscribe to their Pay TV service. Optus said that initially it attempted to sell its services in this way but abandoned the attempt in the light of the poor subscription take up for its Pay TV.
The exception is TransACT. TransACT requires that a subscription be taken to the whole of its bundle of services, including Pay TV.
The Tribunal concludes that, in so far as it is necessary to characterise the Retransmitters, they are engaged in the business of distributing subscription television services, but that, as a very minor or incidental part of that business, they also retransmit FTA broadcasts.
C. TECHNICAL MATTERS
The following paragraphs set out some technical details relating to retransmission. The following abbreviations are used:
ABA: Australian Broadcasting Authority
CAS: conditional access system
DAC: digital-to-analogue converter
HD: high definition
HFC: hybrid fibre coaxial
SD: standard definition
STU: set top unitC.1 TRANSMISSION OF FTA CHANNELS BY FTA BROADCASTERS
The metropolitan FTA broadcasters broadcast their services in Australia in analogue and digital format. Prior to 2001, all FTA television was broadcast only in analogue format. The analogue signal is received by viewers' television receivers via an antenna and then converted (or demodulated) to a complex set of waveform components that recreate the original picture and sound. At present, most television receivers in Australia are analogue receivers.
FTA broadcasts in digital format began on 1 January 2001 in Sydney, Melbourne, Brisbane, Adelaide and Perth. Some regional FTA broadcasters also broadcast in digital format.
FTA digital broadcasts are in two formats: Standard Definition (‘SD’) and High Definition (‘HD’). HD can be viewed only on compatible digital equipment, such as a monitor, that is capable of displaying the additional amount of data that is transmitted and received. HD broadcasts incorporate roughly 2 to 3 times more data than SD broadcasts, in order to support the improved picture quality.
C.2 TRANSMISSION OF PAY TV CHANNELS BY PAY TV PROVIDERS
Transmission of Pay TV channels by analogue cable
Until March 2004, the Pay TV providers' cable transmission was only via analogue cable. Foxtel's analogue cable signal is received by the viewers’ television sets via the Foxtel set top unit (‘STU’) and converted (or demodulated) into a complex set of waveform components that recreate the original picture and sound.
Optus transmits its Pay TV service in the same manner as Foxtel’s analogue cable service.
Transmission of Pay TV channels by digital cable
To transmit Pay TV channels digitally, Foxtel follows the same process as is used by the FTA broadcasters in their digital transmission. The digital cable transmission is currently in SD only, and is to materially the same technical standard as the FTA digital broadcasts.
Foxtel’s digital cable transmission is via the Telstra HFC cable network; the network through which the analogue cable transmission is delivered.
Optus does not transmit cable programs in digital format.
Transmission of Pay TV channels by the Optus C1 satellite
In the case of satellite transmission of Pay TV channels, the program signal is broadcast from the C1 satellite to satellite receiving dishes installed at subscribers’ homes and fed through cabling to the STU to be viewed on the subscribers’ television sets. Austar’s and Foxtel’s satellite transmissions from the C1 satellite have always been via digital technology.
C.3 RETRANSMISSION OF FTA CHANNELS BY PAY TV PROVIDERS
Retransmission of FTA channels on the analogue cable platform
Foxtel will serve as an example. For the purpose of retransmitting FTA, Foxtel takes the FTA broadcaster’s analogue terrestrial signal off-air at a headend in each of Sydney, Melbourne, Brisbane, Perth and Adelaide. Telstra, on Foxtel’s behalf, encodes and adds conditional access information to each FTA program in order to scramble the content for retransmission. The content of the retransmitted program is exactly the same as the content of the program terrestrially transmitted by the FTA broadcaster.
The FTA broadcaster’s service distribution is limited to the geographic coverage of the HFC cable network within the relevant Australian Broadcasting Authority (‘ABA’) licence area for that broadcaster. For example, subscribers in Sydney cannot receive by retransmission the FTA programs broadcast by Channel 9 Brisbane. This position is in contrast to that in many overseas countries where subscribers to Pay TV receive by retransmission distant and foreign FTA programs (see Part F below).
Retransmission of FTA channels on the digital cable platform
The process for retransmission of FTA channels on Foxtel’s digital cable platform is very similar to the process for the retransmission of the FTA analogue signal. Again, Foxtel receives the terrestrial signal off-air and the signal is ‘multiplexed’ and ‘scrambled’, and information relating to access and service is added.
With respect to Channel 9 in Sydney, Melbourne and Brisbane, and the ABC and SBS nationwide, Foxtel takes the broadcaster’s terrestrial digital signal off air and retransmits it, using a technology that restricts reception to subscribers in the relevant licence area for that FTA broadcaster. The FTA broadcaster’s service distribution is also limited to the geographic coverage of the HFC cable network within the relevant ABA licence area for that broadcaster. The Retransmitters claim that the quality of the signals for Channel 9 in Sydney, Melbourne and Brisbane, and the ABC and SBS nationwide, is identical, whether they are transmitted terrestrially or retransmitted via Foxtel’s digital cable service, because Foxtel simply takes the terrestrial digital signal off-air.
With respect to Channels 7 and 10 nationwide, and Channel 9 in Adelaide and Perth, Foxtel takes the broadcaster’s analogue terrestrial signal off-air and converts it into a digital signal. The Retransmitters claim that this results in the quality of the retransmitted signal being inferior to the terrestrial digital signal.
Screenrights sought to qualify the comments of the Retransmitters relating to comparative signal quality. It said that it is important to distinguish between the quality of the signal and the quality of the image on a subscriber’s screen. While the signal quality may be the same as between the different modes of delivery, actual picture quality is dependent on other factors such as the nature and placement of the subscriber’s aerial, the quality of the receiving equipment and the presence of external objects that may cause interference with reception.
Foxtel does not retransmit any FTA channels in HD format. All retransmitted programs are limited to SD format. However, there was evidence that it is possible that, in the future, SBS and Channel 9 programs will be retransmitted in HD format.
Optus does not at present retransmit programs in digital format. There is no evidence relating to Austar’s retransmission of FTA channels on its Darwin cable service.
Retransmission by satellite
Foxtel has the technical ability, both in terms of the system and of transponder capacity, to retransmit the programs of all FTA broadcasters via the C1 satellite. However, Foxtel does not currently do so. The position is as follows.
Foxtel retransmission of Channel 9 by satellite
Foxtel retransmits the Channel 9 programs under an agreement with Channel 9 which requires Foxtel to contract with the relevant Optus entity for the supply of the capacity required to retransmit the programs.
The agreement provides for Foxtel to retransmit Channel 9 with certain enhancements and interactive applications selected by Channel 9, subject to those enhancements and applications fitting within the capacity allocated to each program and being compatible with the Foxtel STU. The enhancements could include multi-angle screens which may consist of a main screen, a parallel transmission of highlights, and a display of data, such as live scoring and historical scoring, which are all transmitted simultaneously.
The quality of the signal retransmitted by Foxtel will depend upon the quality of the signal delivered to the satellite interface point.
Foxtel retransmission of SBS by satellite
Foxtel currently retransmits by satellite to Foxtel Digital subscribers:
(a) an SBS national feed;
(b) an SBS eastern seaboard feed; and
(c) an SBS western feed.SBS has entered into its own arrangements for the supply of satellite capacity from Optus and a third party capacity aggregator. Foxtel has agreed to retransmit certain enhancements and interactive applications, as well as multichannels permitted under the BS Act, subject to the content falling within the satellite capacity constraints and being compatible with Foxtel's STU. The quality of the SBS signal received by Foxtel subscribers depends upon the signal received by Foxtel as well as upon the satellite capacity allocated to a particular signal.
Austar's retransmission of the ABC and SBS by satellite
In November 2002, Foxtel and Austar entered into a Satellite Services Agreement in which Foxtel agreed to share the satellite capacity it obtained on the C1 satellite with Austar, and to provide certain managed services to Austar.
Austar currently retransmits by satellite five State feeds of the ABC, and the FTA broadcasts of SBS. It also retransmits the multichannel, ABC 2.
Conditional access system
The Pay TV providers use a conditional access system (‘CAS’) to ensure that the subscription television video and audio signals transmitted or retransmitted via satellite and cable are received only by authorised subscribers, and that the content of what is received by each subscriber matches the subscriber's proper entitlement as recorded in the Pay TV provider’s subscriber management system.
Reception equipment
In order to receive and decrypt the encrypted signal transmitted by the Pay TV providers, a subscriber requires the following reception equipment:
(a)an authorised smart card (which is a small plastic card about the size of a credit card, containing a microchip);
(b) an STU; and
(c)in the case of satellite subscribers, a satellite dish and a Low Noise Block Converter device attached to the satellite dish.
The CAS is embodied in software and hardware, including, at the subscriber end, smart cards and STUs.
Digital receivers and digital set top boxes
Analogue televisions cannot demodulate, and therefore do not ‘understand’, a digital signal. A digital receiver demodulator and a decoder are required to receive a digital service. This receiver will also include a digital-to-analogue converter (‘DAC’) which converts the digital signal into the complex set of waveform components that recreate the original picture and sound that the analogue television can understand.
A digital receiver, including the DAC, can be located either inside a digital television set or in a separate digital set top box. Digital set top boxes are either SD or HD. They are sold by most electrical retailers. There was evidence that, as at September 2004, although without ‘smartcard’ or CAS capability, they were priced between approximately $169 (an SD box) and $1 199 (an HD box, with other capabilities). Prices for this equipment have steadily fallen since that date and are likely to fall further.
Digital television sets are now available that are able to receive and process the digital signal without the need for conversion. There was evidence that these television sets tend to be at the upper end of the market and are relatively expensive. They incorporate digital receivers, demodulators and decoders.
Remote controls
As Foxtel retransmits the programs broadcast by all five FTA broadcasters to all cable subscribers in Sydney, Melbourne, Brisbane, Perth and Adelaide, it is possible for its subscribers in those cities to switch between Foxtel Pay TV channels and the retransmitted FTA channels, using the single remote control unit which Foxtel provides to its subscribers.
However, to view Foxtel channels, a subscriber will usually still require at least two remote controls: one to switch on the television and to select between FTA and the channel to which the Foxtel STU is configured, and another to operate the Foxtel STU. (It is possible to avoid use of the first remote control by using the button on the set to turn on the television.) Generally, a third remote control is required to operate a video cassette recorder (‘VCR’) and a digital video disc (‘DVD’) player.
Since 1999, Foxtel satellite subscribers have been using two remote controls to view terrestrial (FTA) and satellite (Pay TV) services.
It is possible to purchase an intelligent or self-learning remote control which will operate most components (for example, television, VCR, DVD players, CD players, etc). The Tribunal was provided with examples of universal or programmable remote controls, including one pre-programmed to Australian cable TV.
In relation to the universal remote control, Mr Delany said:
‘Subscribers to Foxtel Digital receive a remote control that is different from the remote control provided by Foxtel to analogue subscribers. The Foxtel Digital remote control has a universal and learning capability, which allows it to operate as a universal remote control. It can be programmed to perform the functions currently performed by subscribers’ television, VCR, DVD and stereo remote controls, in addition to operating the Foxtel Digital STU’.
That universal and learning capability exists in all Foxtel Digital remote controls (including those already issued to some subscribers), but not all subscribers are aware of this feature. The remote control’s capability allows subscribers to use it to operate both their Foxtel STU and their television set. As a result, Foxtel Digital subscribers can switch between watching Foxtel and watching an FTA channel using a single remote control, even if they do not receive that FTA channel by retransmission through Pay TV.
Austar's remote control for its New Austar Digital subscribers does not have universal programming functionality. When Austar was designing its remote control, it was able to elect to have this functionality to allow switching between the retransmitted channels and its own programming. However, Austar considered that there was more value in enabling subscribers to switch between its television and radio channels, and, therefore, Austar's remote controls have this feature instead. The remote control did not permit both features to be incorporated.
TransACT’s remote control is capable of being programmed to have a universal capacity.
Optus subscribers and Foxtel analogue subscribers need to purchase an intelligent or self-learning remote control if they wish to avoid using multiple remote controls.
Reception quality
Screenrights stressed that the quality of picture and sound of retransmitted FTA programs is superior on Pay TV. It is generally accepted that there are certain places, including in the Sydney metropolitan area, where there is poor terrestrial television reception quality. This is particularly pronounced in what are known as ‘black spots’. In 2000 the Commonwealth government commenced the ‘Television Black Spots Program’ with the objective of ameliorating the position. Funding is provided under the Program to local government authorities and incorporated community organisations for the establishment of new services and the replacement of obsolete equipment.
The Retransmitters maintain that this Program has assisted and continues to assist in overcoming reception problems for many FTA viewers. They also assert that reception of FTA programs via the terrestrial aerial can be improved without resorting to Pay TV, by installing better reception equipment and by changing to digital television where it is available.
D. RELEVANT PRINCIPLES
D.1 PREVIOUS TRIBUNAL APPROACHES
The expression ‘equitable remuneration’ is used in many sections of the Act to describe amounts payable to copyright owners, often through their collecting societies, where the Act provides for ‘statutory licences’.
In its previous considerations of the expression ‘equitable remuneration’, and the possible approaches to the determination of such an amount, the Tribunal has discussed various approaches. They can be analysed in different ways and some instances there is overlap between them:
· ‘market rate’, that is, the rate actually being charged for the same licence in the same market in similar circumstances;
· ‘comparable bargains’, that is, bargains not in the same market but sufficiently similar to the notional bargain next mentioned to provide guidance to the Tribunal;
· ‘notional bargain rate’, that is, the rate on which the Tribunal considers the parties would agree in a hypothetical negotiation;
· the rate which the Tribunal determines as a result of what, for want of a better term, has been called ‘judicial estimation’.
There is no market (or ‘normal’ or ‘going’) rate in Australia for licence fees charged to Pay TV providers for a licence to retransmit FTA broadcasts, or, more precisely, to retransmit the works, sound recordings and cinematograph films comprised in such broadcasts (cf Copyright Agency Ltd v Department of Education of New South Wales (1985) 4 IPR 5 (Sheppard P) (‘First Schools Case’) at 15-16; Fair Fitness Music Association v Australasian Performing Right Association Ltd (1998) 43 IPR 67 (‘Fair Fitness v APRA’)). There is evidence of bargains made between collecting societies and retransmitters in overseas countries which is discussed in Part F below, but that is not an Australian market.
Nor is there in Australia any completely comparable bargain to the notional bargain between Screenrights and the Retransmitters with which we are concerned. We address two bargains in Australia which have been suggested to be comparable at [462]-[475]. In addition, there is before the Tribunal a substantial body of evidence of rates that have been negotiated between retransmitters and a collecting society overseas. We discuss this evidence in Part F below.
The ‘notional’ (or ‘hypothetical’) bargain between ‘a willing, but not anxious, licensor and a willing, but not anxious, licensee’ is an approach with which the Tribunal is familiar (First Schools Case at 15; and see WEA Records Pty Ltd v Stereo FM Pty Ltd (1983) 1 IPR 6 at 25-27). However, where the Tribunal has thought the notional bargain approach not entirely appropriate, it has resorted to ‘judicial estimation’ (see, for example, the First Schools Case at 15-16; University of Newcastle v Audio-Visual Copyright Society Ltd (1999) 43 IPR 505 at [30]). Perhaps the expression ‘judicial estimation’ appropriately describes the Tribunal’s approach to its task in all cases, any comparable bargain, notional bargain and perhaps even any market rate being but particular useful tools of judicial estimation.
Report of the Inquiry by the Copyright Tribunal into the Royalty Payable in Respect of Records Generally, published on 24 December 1979, was the result of the first case decided by the Tribunal. It concerned the licence given by the then s 55, subject to the conditions set out in that section, to manufacture for retail sale a record of a musical work, once a recording of it had been made in, or imported into, Australia, or into any of the countries adhering to Berne or the Universal Copyright Convention. Under the provisions of the Act then in force, the Tribunal was required to make a report to the Attorney-General as to the amount of royalty that was ‘equitable’. For present purposes, the expression ‘equitable royalty’ may be treated as having the same meaning as ‘equitable remuneration’.
The Tribunal expressed the opinion (at 4.24 (p25)) that an ‘equitable’ royalty for the purposes of s 58 was one that represented fair and just remuneration to the copyright owner for the rights acquired by means of the compulsory licence. The Tribunal said (at 4.32, p26) that ‘[w]hile it may be relevant to have regard to the interest [of] the public generally or as consumers in particular, … the basic question is what rate of royalty would provide equitable remuneration to the copyright owner’, and that it was ‘not relevant to ask whether the rate is “equitable to the public”’, although it was relevant to consider whether any price increase that might flow from a royalty increase ‘could adversely affect the market because of consumer resistance’. It would not be equitable remuneration to the copyright owner if, as a result of consumer resistance to an excessively high rate, sales fell right away: in the absence of special circumstances, the amount that will provide equitable remuneration to the copyright owner will require that the consumer have access on reasonable terms and at a reasonable price.
The First Schools Case concerned 15 applications by Copyright Agency Ltd (‘CAL’) pursuant to the then s 53B and s 149A. The relevant licence was that conferred on educational institutions to make copies of material for their educational purposes. The amount payable by the institution to the copyright owner was identified as ‘equitable remuneration’. (Part VB, Div 2 of the Act now contains the régime governing the statutory licence given to educational institutions to reproduce copyright works for their educational purposes, the amount payable by them being still identified as ‘equitable remuneration’).
Sheppard P paraphrased the expression ‘equitable remuneration’ as ‘fair remuneration’ (at 27). His Honour confessed to having found the exercise of determining an amount of equitable remuneration ‘extremely difficult’, and said (at 34) that what was involved was ‘judicial estimation’. Sheppard P indicated, however, that ‘judicial estimation’ should be resorted to only where:
· there was no normal actual rate being charged in comparable circumstances; and
· the notional bargain approach was not available or was thought to be fallible in the circumstances of the case.
Foxtel and TransACT retransmitted FTA programs from the beginning of their respective operations. Optus commenced doing so as soon as it became clear that to do so would not infringe copyright (see [61]). In all cases the publicity directed to prospective subscribers mentioned the availability of the FTA programs. Foxtel and Optus counted the FTA programs in their statement of the number of channels available to subscribers.
In its Product Plan of March 1995, Optus described the making available of FTA programs as giving it the ‘automatic tune in factor’. Mr Delany of Foxtel gave five reasons for Foxtel’s retransmitting the FTAs at the start up of its subscription service:
- Optus was retransmitting FTA programs and including them in its channel count, and Foxtel would give the appearance of providing less services if it did not retransmit them;
- retransmission of FTA programs by Pay TV providers was common overseas, and Australian consumers would expect a like treatment;
- retransmission of that with which consumers were familiar (FTA channels) would ease their acceptance of Pay TV;
- retransmission provided a convenience to subscribers;
- the cost of retransmission was very low.
It seems probable that these reasons were applicable to varying degrees to the decisions made by the other Retransmitters to retransmit the FTA channels.
Except on its cable network in Darwin, where it retransmits the programs of all the local FTA channels by cable, Austar has only ever retransmitted by satellite the ABC and SBS. It has always publicised its retransmission of them.
Publicity after commencement
Optus, TransACT and Austar continue to publicise the availability of FTA in their subscription literature and advertisements. TransACT makes particular mention of the fact that the FTA programs are available in digital format ‘without outlay of a digital set top box’.
Foxtel included the availability of access to FTA programs in its advertisements from 1996 to 1999, but does not now do so, at least generally speaking. However, from time to time reference to it appears. For example, at the time of the launch of digital transmission the Chief Executive Officer of Foxtel, Kim Williams, referred to consumers being able to watch ‘open broadcast channels seamlessly using one remote control’. Foxtel Call Centre staff, while being instructed not to promote the retransmission of FTA programs, were nevertheless given a script for satellite customers that referred to newly available access to some FTA programs as ‘Great news’.
Program guides
All Retransmitters include details of the FTA programs, where those details are made available to them, in their electronic program guides (but not in their printed guides). The listing in the electronic guide is not, however, solely an initiative of the Retransmitters. In its agreement with Foxtel relating to satellite retransmission, Channel 9 required the listing of its programs and also chose the channel number that was to be allotted to it. In their agreements, the ABC and Channels 7 and 10 also required the listing of their programs in the electronic guide.
Reasons for continuing retransmission
Mr Delany of Foxtel did not believe that the factors that justified the retransmission of FTA programs when Pay TV was first transmitted apply today. He said that the increase in the number of Pay TV channels and the greater familiarity of consumers with Pay TV (referred to as the ‘maturity’ of the market) meant that the FTA programs were now of less value to Pay TV providers.
Why, then, do they continue to retransmit FTA? The principal reason given by Mr Delany was that a service once provided to subscribers cannot readily be withdrawn. Withdrawal would be possible only if something were substituted and an explanation were provided to subscribers. (A similar view was expressed by Mr Keely of Optus.)
This explanation of the reason for continuing the retransmission of FTA programs does not fit comfortably with the fact that Foxtel is endeavouring to reach an agreement with Channels 7 and 10 to enable the retransmission of their programs on satellite Pay TV. Apparently Foxtel sees an advantage in this. Nor does the desire to add these channels to its menu fit comfortably with the suggestion referred to above that the previous absence of FTA programs from satellite transmission indicated that they were not significant to subscribers or to the Retransmitters.
There was evidence, which we ordered remain confidential, relating to the agreements between some Retransmitters and some FTA stations which indicated that there were complex cross funding arrangements relating to the bases on which the FTA channels would be retransmitted by satellite. Screenrights claimed that these arrangements indicated that retransmission was of value to the Retransmitters, in that they were prepared to subsidise some of the costs incurred by the FTA providers in using the satellite for transmission of their programs. A close examination of the arrangements show them to be very complex and to have been influenced by considerations other than a desire on the part of the Retransmitters to have the FTA programs available for retransmission. Little assistance in determining the remuneration to be paid can be derived from these contractual arrangements.
Mr Delany conceded that retransmission of FTA programs must be taken to have some value to subscribers. He also provided as additional reasons for continuing retransmission of FTA, the facts that a decision to cease retransmission would give rise to adverse publicity, and that it might attract political intervention and legislation introducing a ‘must-carry’ régime. He also said that it was desirable from Foxtel’s marketing viewpoint for the cable and satellite subscription packages to achieve parity. He agreed that it would not have been possible for the FTA programs to have been retransmitted by satellite at the time when satellite broadcasting commenced, as there was not sufficient capacity on the satellite.
Ms O’Hara said that a key objective of TransACT was to deliver a wide range of content and services without duplication of infrastructure. She agreed that this included the delivery of FTA programs to subscribers and the capacity to use the Pay TV STU to receive those programs. TransACT saw the provision of video services, including retransmission of FTA, as part of its maximisation of the use of the cable network. She also described TransACT as a ‘triple player’ providing a ‘triple pay service’, by which she meant that TransACT supplied the full communication package of telephony, data and video services. Optus made like statements in regard to its services.
It would seem from Ms O’Hara’s evidence that TransACT views the retransmission of FTA programs as an integral part of its service to subscribers.
We are satisfied that upon the establishment of the Pay TV industry, the availability of FTA as part of the subscription package was viewed as a significant part of the new service. The Retransmitters set up their equipment to enable retransmission as part of their package, even though they did not know until very nearly the day of first broadcast whether they would be entitled to retransmit the FTA programs at all. Since that time they have, to varying degrees, publicised the availability of the FTA programs as part of their offerings.
We accept that there could be circumstances in the future in which the Retransmitters might choose to discontinue retransmitting FTA. However, for present purposes we find that they see an advantage to themselves in continuing to do so, and, indeed, adding to the number of FTA channels retransmitted in the case of satellite transmission.
G.4 COMPARABLE BARGAINS
As noted at [131]-[132], in fixing rates under the various licences provided for under the Act, the Tribunal has sought guidance from bargains that have been entered into by the parties or others.
The parties made submissions that there are two particular bargains to which we might have regard.
The first related to the amounts paid by Pay TV providers to the owners of the rights in the programs broadcast on their Pay channels. This was urged fairly weakly as a guide, and it does not seem to provide a useful comparison. The negotiation at arm’s length with producers of programs for first viewing on Pay TV channels is very different from the negotiation that would take place in respect of the retransmission of programs that are already being shown simultaneously on available FTA channels.
The second bargain is perhaps more to the point. An agreement was made in 2000 between the Australasian Performing Rights Association (APRA) and ASTRA, representing all Pay TV providers (‘the APRA/ASTRA agreement’). It replaced an earlier agreement made in 1996 (shortly after the introduction of Pay TV in Australia) between the same parties. APRA is the collecting society for music copyright owners in respect of, relevantly, their broadcasting right.
Brett Cottle, Chief Executive of APRA, negotiated the APRA/ASTRA agreement on APRA’s behalf, and gave affidavit evidence.
The APRA/ASTRA agreement related to all music broadcast by Pay TV providers. It included music broadcast over audio channels. Mr Cottle said that at the time he gave no particular thought to the commercial value of the then proposed retransmission right. He said that the agreement ‘provided for payment of blanket licence fees expressly calculated as a percentage of each station’s gross advertising revenue’. He said that, ‘rightly or wrongly’, he considered that the advertising revenue derived by an FTA station would effectively include the value to an advertiser of an audience reached through retransmission by an ASTRA member. Mr Cottle said he felt that it would have been difficult to negotiate with ASTRA an additional commercial value to be attributed to the right of its members, the Pay TV providers, to retransmit the music in respect of which the FTA stations were already paying APRA.
In February 2002, APRA reached agreement with the Federation of Australian Commercial Television Stations on a new licence scheme covering the broadcasting of musical works by the FTA stations.
In December 2004, APRA gave notice of termination of the APRA/ASTRA agreement, with effect from 31 March 2005. APRA is negotiating a new licence agreement with ASTRA, but in view of Screenrights’ status as the declared collecting society under Pt VC of the Act and the pendency of this proceeding before the Tribunal, the retransmission right will not be included in the new licence offered by APRA. It was not disputed by the parties that APRA would be entitled to 7.4 percent of the total amount of equitable remuneration paid by the Retransmitters to Screenrights pursuant to the determination to be made in this proceeding.
The Retransmitters submit that Mr Cottle’s evidence in relation to the negotiation of the APRA/ASTRA agreement indicates that APRA placed no value on the broadcasting of music on the retransmitted FTA programs.
Mr Cottle said that ‘the negotiations were complex and difficult’, while counsel for Screenrights characterised the APRA/ASTRA Agreement as ‘a bad deal’, a fact borne out by confidential evidence as to the cost of making programs given by Steven Tomsic, Strategic Planning Manager of Foxtel.
The Retransmitters provided us with amounts derived from the APRA/ASTRA Agreement suggesting the value of the retransmission of the FTAs. Screenrights attacked the validity of these calculations. We do not find them to be of particular value as they were too speculative to provide a sound basis for reaching a conclusion on what the present parties might have agreed upon as the remuneration to be paid.
We are in no position to judge the merits of the APRA/ASTRA agreement bargain from APRA’s viewpoint, but note that Mr Cottle is a very competent copyright lawyer and executive with long experience in bargaining the value of the product that APRA sells. The low value that he accorded to the broadcast of music on the retransmitted FTA channels can be seen as indicative of an assessment of its value by one of the bodies that will receive payment from the amount of equitable remuneration to be fixed by the Tribunal.
The APRA/ASTRA agreement was concerned with broader issues than those which are the subject of the notional bargain that we must postulate. The desirability of reaching an outcome across a range of matters may induce parties to agree to resolve a particular matter differently from the way in which they would do if that matter were the sole subject of the bargain.
APRA and ASTRA were bargaining over one type of use (public broadcasting) of one type of copyright work (music) with which the present application is concerned. The amount that can be said to be ascribable under the APRA/ASTRA agreement to the broadcasting of music on the FTA channels can only be based on estimation, as it was not addressed discretely in the agreement. It is drawing a long bow to extrapolate from the APRA/ASTRA agreement a figure that can be used in fixing the equitable remuneration across the range of works and uses for which Screenrights is entitled to receive equitable remuneration from the Retransmitters. We do not find the APRA/ASTRA agreement particularly useful as a comparable bargain.
H. SUBMISSIONS AS TO AMOUNT OF EQUITABLE REMUNERATION
AND RELATED ISSUES
H.1 SUBMISSIONS AS TO AMOUNT
Screenrights’ submissions
Amount of equitable remuneration
Screenrights’ primary submission is that an amount between $2.00 and $10.00 pspm should be accepted as the ‘retail’ value to consumers of retransmission of all five FTA channels (ABC, SBS, 7, 9 and 10). Screenrights relies on the results of the Survey and other evidence, including evidence of the inhibition on churn. Screenrights submits that the amount should be split equally between the copyright owners and the Retransmitters, so that the amount of equitable remuneration lies between $1.00 and $5.00 pspm, and Screenrights settles upon $2.50 pspm, which includes the multichannels, ABC 2 and SBS News.
Screenrights also refers to the approaches of Professors Borland and Carson supporting the inclusion of some element for indirect revenue generated to the Retransmitters because, according to the submission, retransmission of FTAs increases subscriptions to Pay TV.
Screenrights submits that the amount of $2.50 pspm is conservative because:
· it does not allow for Screenrights’ administrative costs;
· it represents half the Retransmitters’ ‘profit maximising point’ ($10.00) as revealed by the Survey;
· it includes no special allowance for the FTA digital multichannels.
Screenrights submits that an amount of $1.00 pspm is equitable remuneration if the Tribunal considers that Screenrights is not entitled to credit for indirect revenues generated to the Retransmitters by retransmission. This amount of $1.00 represents 50% of the ‘conservative lower bound of equitable remuneration’ identified by Professor Borland, and the ‘strictest definition of the revenue from retransmission’ identified by Professor Carson, and the most conservative application of the Survey results, relying on data from Question 7 rather than Question 9 (because of the possibility of bias in Q9).
Screenrights submits that a reduction of 2 percent, which is in line with Screenrights’ Distribution Policy, should be applied if the Tribunal should determine that a discount for the copyright in the broadcast signal is appropriate. Screenrights argues, however, that this would be unfairly prejudicial to the copyright owners, due to the ‘extreme conservativeness’ of the base amount.
If, however, the discount of 2 percent for the broadcast signal copyright is applied (and if a share of indirect revenue generated is not included in Screenrights’ favour) the amount of $0.98 pspm would be the amount of equitable remuneration for the full suite of five channels.
Timing of payment
Screenrights notified the Retransmitters under s 135ZZK that the amount determined by the Tribunal would be due on and from the dates of their respective remuneration notices (see [4]), and therefore opposes the Retransmitters’ suggestion of a phasing in of payments in respect of the period preceding the date of the Tribunal’s determination. Screenrights also opposes their submission that they should be allowed to adduce evidence on the issue of retrospectivity payments. Screenrights submits that this would re-open the issue of the amount of equitable remuneration itself, and points out that the Retransmitters did not lead evidence from their executives as to the impact that a determination would have on the Retransmitters.
Screenrights seeks indexation by reference to the Consumer Price Index for all years after calendar 2005, in order to preserve for the future the full value of the amount now determined.
Retransmitters’ submissions
Amount of equitable remuneration
The Retransmitters propose an amount of 10 cents pspm for the retransmission of all five FTA channels. They say that they recognise the Act’s requirement that they pay some amount that is more than nominal. They submit that this figure represents a ‘realistic maximum in all the circumstances of this case’. Those circumstances include the following:
· the fact that retransmission is a secondary use, similar to local retransmission in a wide range of markets such as the United States, Canada and Europe (including the United Kingdom);
· the fact that retransmission involves the supply of something that is conveniently available to consumers completely free of charge;
· the fact, according to the submission, that a lower bound of zero dollars is supported by the APRA/ASTRA agreement.
The Retransmitters submit that the Tribunal should give no weight to the Survey. They submit that the Newspoll survey demonstrated that contingent valuation cannot be applied reliably in the circumstances of this case. They would also dismiss the evidence of Mr McGarrity and Mr Peters and their expert calculations as ‘arithmetical representation of guesswork’, and characterise comparisons such as those between the cost of a bundle of Pay TV programs and a bundle of FTA programs as fundamentally flawed.
Timing of payment
The Retransmitters submit that the amount payable should be calculated from the first day of the month immediately following the date of the Tribunal’s determination, not from the dates of the giving of the remuneration notices in 2001, and that the parties should be heard by the Tribunal on the issue of retrospectivity. Originally, Screenrights did not specify any amount, and this fact, and the delays caused by the Survey, are reasons why, according to the Retransmitters, the Tribunal should allow submissions to be made on retrospectivity.
H.2 REMUNERATION FOR LESS THAN FIVE CHANNELS
Screenrights’ submissions
In two instances, something less than the full suite of ABC, SBS, 7, 9 and 10 is retransmitted. Foxtel digital satellite retransmits only three: ABC, SBS and 9. Austar satellite retransmits only two: ABC and SBS. Screenrights proposes two possible solutions to the ‘partial bundle’ issue:
· Splitting the equitable remuneration for a full bundle of five channels equally between the five, then applying the resulting per channel amount to each channel included in the particular partial bundle (the ‘Equal Split Approach’ – ‘ESA’); and
· Splitting the equitable remuneration for a full bundle of five channels on the basis of FTA audience share (ratings), so that for each of the five there is a share based on its share of the FTA audience (the ‘Audience Share Approach’ – ‘ASA’).
Screenrights submits that consumer demand for retransmission is more complex than the ESA allows for, and that the ASA is more reliable. It proposes, first, a formula ‘based primarily on audience share’, and then one which combines both ESA and ASA by providing for 33% of the amount to be arrived at by the ESA, and for 67% of it to be arrived at by the ASA.
Retransmitters’ submissions
The Retransmitters reject both formulas proposed by Screenrights. They ask that, if the Tribunal fixes an amount higher than 10 cents pspm for the full bundle of five FTAs, they (the Retransmitters) be given an opportunity to be heard further on the question of the calculation of an amount for retransmission of less than the full five, because ‘[w]hether that amount should be calculated as Screenrights proposes, or whether some other calculation is appropriate, is linked to the quantum of equitable remuneration.’
In summary, the Retransmitters ask to be heard further in relation to:
· the amount to be paid where less than the five FTAs are retransmitted (unless the Tribunal determines an amount not exceeding 10 cents pspm for all five);
· retrospectivity;
· the phasing in of payments; and
· indexation by reference to the Consumer Price Index for years after calendar 2005.
I. CONCLUSION
The hypothetical bargain approach requires us to assume the absence of the statutory licence and to inquire what amount Screenrights, representing the relevant copyright owners, and the Retransmitters would agree upon for the Retransmitters to have a licence to retransmit FTA programs simultaneously with the original FTA transmission of those programs.
In that hypothetical bargain, the Retransmitters are the only potential buyers of a licence to retransmit; there is no alternative buyer with whom Screenrights can deal or threaten to deal. Australia does not have a must-carry régime: the Retransmitters can cease retransmission and threaten to cease retransmission.
A licence to retransmit is, however, of some benefit to the Retransmitters. It gives them something to sell to subscribers. Without it, the copyright owners could compel them to end retransmission. The only source of the licence to retransmit is the copyright owners, represented by Screenrights. In the hypothetical bargain, the copyright owners may refuse, and threaten to refuse, to grant a licence to the Retransmitters.
The value to the Retransmitters of the licence to retransmit is generally commensurate with the value placed on retransmission by subscribers. The value of retransmission to subscribers, as the Retransmitters perceive that value to be, will govern the amount of licence fee the Retransmitters will be prepared to offer in their hypothetical negotiation with Screenrights.
Screenrights submits, however, that there are also some benefits to the Retransmitters themselves. First, they submit that there is a ‘sticky’ factor. The argument is that, once a subscriber views FTA via the Pay TV facility, he or she may be inclined to remain with the Pay TV channels and explore viewing them or some of them. In this way, so the argument goes, the Retransmitters acquire a viewing public for their Pay TV channels which they would not otherwise have. The argument assumes that the viewer is watching FTA programs via the STU in the first place, so that the change to Pay TV channels is adventitious.
We do not accept, however, that retransmission of FTA is today a significant subscription driver or that more people switch on their television sets in order to watch FTA through the STU than do so in order to watch Pay TV channels. There is arguably a neutralising ‘sticky’ factor operating in the opposite direction. There are people who switch on their television sets in order to watch a Pay TV channel or channels and who casually move to a retransmitted FTA channel and stay with it for the night. In this respect, retransmission may be seen to give the FTA stations viewers for the night that they might not otherwise have had.
The second benefit to the Retransmitters which Screenrights suggests is a more general version of the first: the contention is that people subscribe in order to be able to watch FTA programs via the STU, and so the Retransmitters get a viewing audience for their Pay TV channels that they would not otherwise have. We reject the argument. The benefit of a better reception of FTA programs may operate on the minds of some people who have poor FTA reception and take FTA to some additional viewers, but in the absence of persuasive evidence, we do not accept that anything more than a small number of people are involved. We proceed on the basis that people subscribe in order to access the Pay TV channels.
In the result, we put to one side both of the small unquantifiable benefits to the Retransmitters that Screenrights has suggested.
The only two benefits to subscribers that have featured in the proceeding are those of the single remote control and an improved reception of FTA.
When Pay TV was introduced, retransmission of FTA was promoted by the Pay TV providers as an attraction for viewers. For TransACT, the retransmitted FTA channels represent a significant proportion of the subscription package it sells (initially five in a basic package of twelve, and now five in a basic package of twenty). Although Foxtel claims that FTA is now an irrelevancy, it still publicises the availability of FTA via Pay TV, and refers to FTA in its program guides.
In the hypothetical bargaining situation, the FTA providers are in a weak position:
· they are not incurring costs on account of retransmission for which they would insist on being reimbursed;
· their viewing audience is increased, albeit to some very small extent;
· they do not lose viewers, who would otherwise watch FTA via their terrestrial aerial.
On the other hand, the Retransmitters must think they derive some value from retransmitting FTA, otherwise they would not incur even the small cost involved in doing so, and would not refer to the availability of FTA in their program guides.
We find it hard to accept that subscribers or prospective subscribers would place a high value on the convenience of being able to move between Pay TV channels and FTA channels by the use of a single remote control. A separate remote control is usually needed to turn on the television set. Moreover, nearly all people who have a DVD or VCR player have a separate remote control for each of them. Both factors have led people to become familiar with the use of multiple remote controls.
The benefit of improved reception of FTA channels presents a difficulty. What number or proportion of viewers of FTA via the terrestrial aerial have a poor quality reception and how poor is their reception? The evidence does not provide answers to these questions. The value that people would place on this benefit must surely vary greatly. For many, the value would be likely to be nil or close to nil, because the quality of reception of FTA via the terrestrial aerial is quite satisfactory. For viewers who have an unsatisfactory reception, there would be a wide range of values, according to the quality of their reception.
Again, however, we find it hard to accept that a substantial proportion of viewers have such a poor reception via their terrestrial aerial that they would value retransmission highly, though there may be some people who would do so.
Screenrights attempted to quantify the value of the retransmission of FTA by the Survey. The Retransmitters attempted to do so by leading evidence of overseas rates.
We addressed the Survey in some detail in Section E, and expressed some conclusions in that section at [279]–[282]. We have numerous difficulties with the Survey. Contingent valuation surveys represent a controversial subclass of the controversial stated preference methodology. Eminent experts were called to support and to attack the merit of the methodology in general, and of the Survey in particular. All were in agreement that stated preferences are inferior to revealed preferences as predictors of what people will do in the real world. We accept the evidence that contingent valuation surveys are prone to an upward bias, although we acknowledge that this may be more pronounced in the case of surveys directed to environmental and social issues.
We put to one side all questions subsequent to Q7, as Professor Borland did, for the reasons given in Section E. We also lack confidence, however, in Q7 itself, for all the reasons given in Section E, including the following reasons:
1. the complexity of the scenario that preceded the putting of Q7;
2. the complexity of Q7 itself;
3.the flatness of the demand curve between price points $7.50 and $10 (see [244], [247]);
4.the Survey’s failure of the monotonicity and exogeneity tests (see [249]-[253]);
5. the omission of any price points below $1; and
6.the failure to include any reference to alternative ways of getting the benefits of retransmission.
We do not find the Survey’s failure of the adding up test so persuasive: we would expect that subscribers may be prepared to pay for two parts of a whole, amounts which total more than the amount that they would be prepared to pay for the whole as an entity.
The evidence shows that Screenrights took great care in the design of the Survey, obtaining the assistance of several experts, taking account of such comments as were made by the Retransmitters, and conducting Sweeney 2 when problems arose with the execution of Sweeney 1. We are not convinced, however, that the Survey is reliable or accurate as a predictor of how much Pay TV subscribers are prepared to pay for the retransmission of FTAs.
There is an important difference between the use able to be made of stated preference surveys by courts and tribunals on the one hand, and the use that businesses and others may choose to make of them on the other hand. There are legal principles that constrain the decisionmaking of courts and tribunals. Courts and tribunals must proceed on the basis of probative evidence, not speculation.
In Reasons for Judgment (No 3) published in this proceeding (Audio-Visual Copyright Society Ltd v Foxtel Management Pty Ltd & Ors (No 3) (2005) 64 IPR 560), we discussed the relevance of the rules of evidence to the admission of evidence by the Tribunal. The present question goes to the weight, if any, to be given to the Survey evidence. We consider that we should apply a principle analogous to an evidential onus in relation to that evidence: it is Screenrights, not the Retransmitters that suffers if we are not persuaded that the Survey reliably predicts people’s behaviour in the real world. Such an approach would not necessarily apply to the use that businesses and others may make of a stated preference survey.
We find applicable the following statement by Diplock LJ in R v Deputy Industrial Injuries Commissioner; Ex parte Moore [1965] 1 QB 456 at 488:
‘The requirement that a person exercising quasi-judicial functions must base his decision on evidence means no more than it must be based upon material which tends logically to show the existence or non-existence of facts relevant to the issue to be determined, or to show the likelihood or unlikelihood of the occurrence of some future event the occurrence of which would be relevant. It means that he must not spin a coin or consult an astrologer, but he may take into account any material which, as a matter of reason, has some probative value in the sense mentioned above. If it is capable of having any probative value, the weight to be attached to it is a matter for the person to whom Parliament has entrusted the responsibility of deciding the issue.’
We have such a level of doubt about the Survey that we attach no weight to it.
Our own appreciation of the benefits that retransmission of FTA offers to subscribers is that they are minor and would be viewed by subscribers and prospective subscribers as minor.
We addressed the overseas rates evidence in Section F and expressed some conclusions in that section at [349]–[349]. We put to one side the United States, Canadian and United Kingdom comparisons for the reasons given in Section F.
There are many difficulties in extrapolating from Europe to Australia. The following issues arise in addition to those that were raised by Screenrights and mentioned Section F:
(1)The number and nature of the local channels being retransmitted (averaging to a per channel basis may not be reliable – in Australia, there is a full suite of five channels of which two are ‘public’ and three are ‘commercial’);
(2)The number and nature of the ‘competing’ Pay TV channels supplied;
(3)The number of competing Pay TV providers/retransmitters;
(4)The relative importance to the respective publics of television viewing (perhaps the colder climate of Europe makes television viewing generally, whether FTA or Pay TV, more highly valued than it is in Australia);
(5)Whether the number and proportion of households in European countries that have poor quality terrestrial reception is different from that in Australia;
(6)The size of the population of subscribers to Pay TV as between the various European countries and Australia.
The Retransmitters do not suggest that any overseas rate can dictate a figure. Counsel for the Retransmitters submits, however:
‘What we did is explore the overseas rates to see what they tell us about benchmarks and goal posts.’
We have come to the conclusion that what we have said above in relation to the Survey applies also to the rates that are being paid in Europe: we simply do not have sufficient confidence in the comparability of the circumstances to regard those negotiated rates as providing truly comparable bargains.
There is no overseas country in which the relevant circumstances are on all fours with those in Australia. Nor do we think we can derive guidance by simply making an adjustment for one or two identifiable differences.
There is no firm evidence guiding us to a particular figure in any way remotely resembling a mathematical calculation. Taking into account all the evidence and recognising that a substantial degree of estimation is involved, and basing ourselves on our own appreciation of the likely value that subscribers, taken as a whole, would see in the benefits of better reception and the single remote control, we have reached the conclusion that the amount of equitable remuneration payable by the Retransmitters in respect of the retransmission of all five FTA channels (including the multichannels) is 22.5 cents pspm.
It will be obvious, from what we have already said, that, notwithstanding the apparent precision of this amount, it has not been arrived at by a process of mathematical calculation and remains the result of a careful estimation and evaluation.
In arriving at the amount mentioned, we have allowed for the contribution that the Retransmitters make to the value of retransmission to subscribers, and for the broadcast signal copyright. The figure is net to Screenrights. The figure takes into account the multichannels. We have also taken into account the submission that retransmission enlarges the FTA audience (and the submission that the viewing of retransmitted FTA leads on to the viewing of Pay TV channels), and there is no reduction (or addition) on this account.
The parties should have the opportunity of making further submissions on the four issues noted at [490].
The proceeding will be stood over to a date for mention. If the parties reach agreement on the outstanding issues, they should advise the Associate to the President so that the determination can be made on that date. If they fail to do so, directions will be made on that date for the making of submissions on those outstanding issues.
I certify that the preceding five hundred and twenty-three (523) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Tribunal. Associate:
Dated: 3 May 2006
Counsel for the Applicant: Mr D K Catterns QC and Mr C Dimitriadis Solicitors for the Applicant: Banki Haddock Fiora Counsel for the Respondent: Mr R Cobden and Ms K M Richardson Solicitors for the Respondent: Minter Ellison Dates of Hearing: 18, 19, 21 October 2004; 11-15, 19-22, 26 and 27 April; 3 June 2005 Date last submission received: 8 June 2005 Date of Judgment: 3 May 2006
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